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Nigeria Power Report Q2 2016

BMI View: An economic crisis, unorthodox monetary policy and concerns about a devaluation of the nairawill deter foreign investment in Nigeria's power sector. This will stall government efforts to plug the powergeneration deficit with private capital, with investors likely to delay market entry until Nigeria comes toterms with a painful economic adjustment to lower oil prices.

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We believe foreign companies are likely to delay or cancel entering the power market entry amidconcerns about opaque power sector policies, a devaluation of the naira and capital controls, whiledomestic investors will struggle to access funding amid liquidity constraints in the banking sector.

Further, there is still little concrete power sector policy beyond the points outlined in the APC manifesto.Policy appears to be premised on privatising and securing the financial viability of the sector as a way ofimproving power supply. However, Babatunde Fashola, the minister of power, works and housing is yetto outline his energy policy in full.

As a consequence of these dynamics we maintain our conservative forecasts for growth in electricitygeneration and capacity. We forecast electricity generation will grow by an annual average of 4.3%between 2017-2025, following a jump in growth as National Integrated Power Plan (NIPP) projects arebrought online in 2016. Gas-fired generation will remain the largest component of the power mix, butgrowth will be constrained by gas shortages.